How Do Esports Organizations Make Money?

Esports organizations make money through a variety of means, including sponsorships, advertising, and merchandise sales.

Introduction

Many people are interested in how esports organizations make money. While there are a variety of ways that they do so, the most common include sponsorships, advertising, and prize money.

Sponsorships are one of the most important sources of revenue for esports organizations. Companies are willing to pay large sums of money to have their brand associated with successful teams and players. Advertising is another significant source of income, with organizations selling space on their website and jerseys to companies who want to reach the esports audience.

Prize money is also a significant source of revenue for esports organizations. Many tournaments offer large cash prizes, and teams that consistently perform well can expect to see a significant return on their investment.

While these are the most common sources of revenue for esports organizations, there are a number of other ways that they can make money. These include merchandise sales, streaming contracts, and appearance fees.

The most common ways esports organizations make money

Esport organizations make money in a few ways, most commonly through sponsorships, and tournament winnings. sponsorships make up the majority of an esports org’s income. Tournament winnings are also a significant source of income for successful teams, but the amount of money varies greatly from tournament to tournament.

Sponsorships

The most common way that esports organizations make money is through sponsorships. In 2017, it was reported that sponsorships made up 61% of the revenue for the entire esports industry!

There are a few reasons why sponsorships are so popular in esports. First, there is a lot of interest in the digital/tech industries in esports (think: PC gaming, mobile gaming, social media, streaming, etc.). So companies like Intel, Logitech, Razer, and Red Bull see sponsoring an esports team or tournament as a way to advertise their products to a tech-savvy audience.

Second, unlike traditional sports where there are only a handful of events each year (e.g., the Super Bowl), there are hundreds of esports tournaments happening all over the world every single year. So there are more opportunities for companies to sponsor an event or team.

Finally, many of the people who watch esports are also avid gamers themselves. This means that they’re more likely to pay attention to – and remember – sponsored messages during an esports event than they would if they were watching another kind of sporting event.

Media rights and partnerships

The most common ways esports organizations make money are through media rights and partnerships. Esports organizations typically have deals in place with various media outlets that give them a portion of the revenue generated from advertising and sponsorships. In addition, esports organizations often have partnerships with brands that help them generate revenue. These partnerships can take many different forms, but the most common is through product placement and sponsorships.

Merchandise and ticket sales

Like traditional sports, many esports teams sell merchandise like team jerseys and branded wearables. The Houston Outlaws, for example, have a full online store with merchandise ranging from $5 stickers to $140 jackets. Fans can also buy tickets to events to see their favorite teams and players in person. Major League Gaming, or MLG, one of the biggest organizers of competitive gaming events, sells tickets to its tournaments on its website. Prices for a three-day pass to the recent MLG Orlando tournament ranged from $60 for general admission to $250 for a VIP experience that included access to a VIP lounge and express entry into the competition area.

Prize money

Apart from advertising, merchandise, and game publisher support, one of the most significant sources of revenue for esports organizations comes from prize money. While advertising, merchandise, and game publisher support are all important revenue streams, prize money is often the lifeblood of an esports organization. This is especially true for organizations that field teams in multiple games. For example, Evil Geniuses is a North American esports organization that fields teams in Dota 2, Counter-Strike: Global Offensive, PUBG, Rocket League, and more. The organization has earned over $34 million in prize money across all games since its inception in 1999.

Prize money comes from a variety of sources, the most common of which are game publishers, tournament organizers, and crowdfunding campaigns. Game publishers will often put up large sums of money to incentivize competition in their games. For example, Riot Games (the developer and publisher of League of Legends) offers $5 million in prize money to teams competing in its annual world championship tournament. Similarly, Blizzard Entertainment (the developer and publisher of Overwatch) offers a minimum of $1 million to teams competing in its annual Overwatch League playoffs.

Tournament organizers also play a big role in funding prize pools. Some tournament organizers are able to generate enough revenue from ticket sales, sponsorships, and other sources to cover the entire cost of the event; this allows them to put up 100% of the prize money themselves. Other tournament organizers rely on game publishers or other third parties to help finance the event; this is often done through sponsorship deals or other forms of financial support.

Lastly, crowdfunding has become an increasingly popular way to finance esports events. Platforms like Kickstarter and Indiegogo allow anyone with an idea for an event to solicit donations from the community at large. This type of funding has become especially popular with independent tournament organizers who may not have the financial backing of a game publisher or other major esports organization.

How do these revenue streams compare to traditional sports?

There are a few key ways in which esports organizations make money, which we’ll explore below. It’s worth noting that many of these revenue streams are similar to those used by traditional sports organizations. However, there are some key differences that set esports apart.

One of the biggest revenue streams for esports organizations comes from sponsorships and advertising. Similar to traditional sports, esports organizations will often sell advertising space on their website or streaming platforms, as well as on any physical merchandise they produce. They may also sell sponsorships for specific events or teams within their organization. However, due to the global and digital nature of esports, these sponsorship deals can be worth much more than their traditional counterparts.

Another big revenue stream for esports organizations comes from media rights deals. These deals give media companies the exclusive rights to broadcast specific events or tournaments. Again, due to the global reach of esports, these deals can be worth significantly more than traditional media rights deals.

Finally, many esport organizations also make money through ticket sales for live events. As with traditional sports, this is often a significant source of revenue for esport organizations. However, due to the relatively young age of the esport industry, ticket prices are often much lower than those for traditional sporting events.

What are the challenges facing esports organizations?

There are a few key ways that esports organizations make money. The most common is through sponsorships, which can come from a variety of sources including gaming companies, hardware manufacturers, and energy drink brands. Other forms of revenue include advertising, tournament winnings, and merchandise sales.

However, esports organizations face a number of challenges when it comes to generating revenue. For one, the entire esports ecosystem is still in its infancy, which means that there is a lack of long-term sponsorships and partnerships. Additionally, most esports organizations are focused on a single game or franchise, which limits their ability to attract a wide range of sponsors. Finally, the vast majority of esports organizations are based in North America and Europe, which leaves them at a disadvantage when competing for sponsorships from brands based in Asia.

Conclusion

From sponsorships to merchandise sales, there are a number of ways in which esports organizations can generate revenue. The most successful organizations are those that have a diversified income stream, which helps to insulate them from fluctuations in any one particular area.

As the esports industry continues to grow, it is likely that new and innovative ways of generating revenue will emerge. Organizations that are able to adapt and take advantage of these new opportunities will be well positioned for long-term success.